Climate change

Power to the people: pro-poor electricity provision

Can access to electricity from renewable sources play a role in poverty reduction?

The Night Lights of Planet Earth. WoodleyWonderWorks, CC BY 2.0
Edited by Alan Stanley
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Energy poverty is a major development issue with nearly 1.3 billion people, close to one-fifth of the world’s population, have no access to electricity. After intense activity during the 1970s, electrification slipped down the list of development priorities, largely due to the disappointing results of many programmes and it took until the late 1990s for this to begin to change. This, to some extent coincided with increasing global action recognising the need to reduce carbon emissions from existing energy systems to address climate change. To make progress on both objectives therefore suggested the need for a sharp increase in renewable electricity production, both on and off-grid.

Today, electrification is again seen as central to poverty reduction efforts and where production comes from renewable sources, it can also make a positive contribution to low-carbon development strategies – on the face of it a classic ‘win-win’ situation. Certainly electricity access can have significant impacts on poverty and welfare, but not automatically. Once electricity is generated, it needs to be reliably fed into the system and be made accessible, and affordable, for the poor. This increased provision then needs to translate into increased consumption and this in turn needs to translate into poverty reduction and economic growth. 

Continue reading: The generation game

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Stephen Spratt 

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The generation game

A causal chain describing how to achieve electricity provision that is both pro-poor and low carbon might look something like this.

electricity diagram bigger.jpg

Casual chain of poverty impacts of electricity generation capacity. Source: Ana Pueyo et al, 2013

Casual chain of poverty impacts of electricity generation capacity. Source: Ana Pueyo et al, 2013

Casual chain of poverty impacts of electricity generation capacity. Source: Ana Pueyo et al, 2013

For on-grid systems it is not enough to simply build and maintain adequate generation and distribution capacity. There are crucial decisions to be made on which communities to electrify. In this regard, public utilities have traditionally concentrated their services on urban elites. Because of concerns over cost recovery, donors have also favoured densely populated communities, with relatively high average household income, located close to existing grids. Although these issues may partly explain the low impacts of earlier electrification projects on poverty, different approaches are possible. For example, around 17 per cent of World Bank funded projects use a social allocation rule, which prioritises deprived areas regardless of economic criteria.

But even if electricity is available, poor households need to be able to afford connection costs and buy and use sufficient electricity to alleviate their poverty. These were big issues in the 1980s and remain a problem with rural electrification projects today. Once connected, usage depends on ownership of appliances as diverse as lights, mobile phones, televisions, radios, fridges, water pumps, sewing machines or machinery. Because of the costs involved, however, most poor households use electricity only for lighting, severely limiting potential benefits. As incomes rise, more diverse uses are introduced (e.g. mobile charging, television and radio use) but the use of electricity for productive activities (e.g. in agriculture, industrial or service sectors) remains rare. As a result, the income generating effect of electricity remains low, which in turn contributes to poor people’s inability to afford electricity.

Continue reading: Power to the people

RECOMMENDED READING

The Evidence of Benefits for Poor People ofIncreased Renewable Electricity Capacity: Literature Review
Institute of Development Studies UK, 2013
Lack of access to electricity is seen as a major constraint to economic growth and increased welfare in developing countries. In this report, the authors conducted a review of the evidence that investments in electricity-generating capacity have benefits for poor people, and what factors influence that relationship. The review analyzes a large and diverse range of literature dealing with the poverty impacts of increased generation capacity.
Utilising Electricity Access for Poverty Reduction - Full report
Practical Action [Intermediate Technology Development Group], 2015
The productive use of electricity can support sustained poverty reduction by enabling the creation and improvement of income generating activities.
What are the major barriers to increased use of modern energy services among the world’s poorest people and are interventions to overcome these effective?
Collaboration for Environmental Evidence, 2012
This systematic review was commissioned by Department for International Development (DFID) in the UK and published by the Collaboration for Environmental Evidence (CEE). It aims to answer the questions, as part of a drive for evidence-based policy making: (i) 'What are the major barriers to increased use of modern energy services among the world’s poorest people', and (ii) 'are interventions to overcome these effective?' The report begins with a background to modern energy service access, such as electricity.
Strengthening the Poverty Impact of Renewable Electricity Investments: Summary of E-Discussion
Institute of Development Studies UK, 2014
On 19 and 20 March 2014 IDS convened an e-discussion on ‘strengthening the poverty impact of renewable electricity investments’.
Power and people: the benefits of renewable energy in Nepal
World Bank, 2011
In Nepal, a large section of the rural population has no access to an electricity supply. Sixty three percent of households instead rely on oil-based or renewable energy. This report looks at the work of the Alternative Energy Promotion Centre (APEC), a government institution which is regarded globally as a leading advocate of the expansion of community and private led renewable energy technologies in rural areas. It features findings from a study which was set up to design and establish an evaluation system for APEC.
Pro-Poor Access to Green Electricity in Kenya
Institute of Development Studies UK, 2015
Is Kenya on track to follow an electrification strategy that is green and pro-poor? What are the main challenges to following this path? The two questions guiding this study are particularly relevant in a country with exceptional renewable energy resources, but where 80 per cent of the population lacks access to electricity and 50 per cent lives in poverty.This study looks at four particular issues relating to access to green electricity for the poor: accessibility; commercial viability for project developers; financial sustainability for the State; and affordability.

Power to the people

If these issues around access are acknowledged and dealt with appropriately there is some evidence that increasing the supply of electricity is more likely to reduce poverty and improve the quality of poor people’s lives.

Electricity consumption can affect poverty in many ways. Direct benefits can include raising incomes by liberating time for paid employment, enabling innovation and the creation of new enterprises. More indirect benefits at the household level include improved education and health as, for example,  improve as lighting enables studying at home and the use of electrical appliances improves food storage and reduces indoor air pollution.

Positive gender impacts can result from better access to information and less time spent on non-paid work and increased entertainment and information via television, radio and mobile phones are also likely to improve opportunities and quality of life.

Outside the home, electricity facilitates sterilization, water purification and supply, sanitation, and the refrigeration of essential medicines whilst  access to electricity may also increase the willingness of educated workers (e.g. teachers and doctors) to live in rural areas.

However measuring these indirect impacts has proved extremely challenging. They  tend to be difficult to quantify and can be distorted by external factors such as the tendency to increase access to areas that already have relatively good prospects. Many effects can only be seen after long periods, but as time passes they become more difficult to attribute to changes in electricity access. Impact studies need to be very carefully designed to avoid these problems to ensure that programmes are designed to maximise poverty impacts.

At a more macro level increased electricity supply can contribute more broadly to economic growth by, for example, reducing production costs, enabling innovation, increasing investment and improving agricultural and industrial productivity.

But although the channels are well understood, evidence on the causal link from increased electricity consumption to economic growth remains inconclusive. Greater electricity consumption can contribute to growth, but growth also increases demand for electricity. An important question, when considering whether to prioritise electrification is the effectiveness of this approach in comparison to other measures to boost growth. On this question, electricity supply, access and reliability should be prioritised if it is a key binding constraint on growth.

Continue reading: Back to introduction

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Maximisation of Benefits for the Poor of Investments in Renewable Electricity: A Policy Tool for Project Planning
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Electricity improves users’ quality of life and can enable income generation when used for productive activities, hence supporting an escape from the poverty trap. Where generation comes from renewable sources, it also makes a positive contribution to low-carbon development; for many, this is a classic ‘win-win’ situation.This report uses the evidence collected through a comprehensive literature review to develop a policy tool to maximise the poverty impact of electrification projects.
Cost and returns of renewable energy in sub-saharan Africa
Institute of Development Studies, Sussex [ES], 2016
The allocation of finance for the provision of green electricity in sub-Saharan Africa (SSA) should be informed by two questions. Which generation technologies are financially viable? And which generation technologies are affordable? The reserachers' analysis addresses these for Kenya and Ghana by calculating the levelised cost of energy (LCOE) and internal rate of return (IRR) for a portfolio of renewable energy ( RE ) technologies under different scenarios.Results show better fundamentals in Kenya for the successful implementation of renewable energy projects.
Financing Universal Access to Electricity
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The recent emphasis on the provision of modern energy services as an important ingredient for development has improved finance availability for the goal of Sustainable Energy for All (SE4ALL).However, existing financial flows are still insufficient to meet the target of universal access of sustainable energy by 2030 and often ignore poor people, who cannot afford the service, or those renewable energy technologies that cannot offer high rates of return.Drawing on a large dataset of official development assistance and private investment for electrification between 1990 and 2012, our research ha
Rural Electrification and Rural Development
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This is the second chapter of the book Rural Electrification Through Decentralised Off-grid Systems in Developing Countries. Recent interest in rural electrification has emphasised the importance of linking its development with productive uses for energy and poverty reduction. This has been viewed as necessary to increase the pace of rural electrification and reduce its concentration on a relatively small number of developing countries. Despite this emphasis, progress in electrifying remote rural areas has been slow.
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In recent years there has been a renewed interest in infrastructure development in Sub-Saharan Africa. This article reviews trends in rural electrification over the past 30 years and explores the unstable levels of support available. Low connection rates, limited productive use and the lack of empirical evidence for impacts on outcomes such as health and education are issues explored in more depth. Recent and upcoming impact evaluation studies are also briefly summarised.
Integrating Energy Access and Employment Creation to Accelerate Progress on the Millennium Development Goals in Sub-Saharan Africa
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